Anthony Guerrini of Southbury runs Superior Cleaners at the Matrix Corporate Center in Danbury, Conn.
The business offers next-day service for dry cleaning and laundry. The cleaners is one of the amenities available to tenants. less

Anthony Guerrini of Southbury runs Superior Cleaners at the Matrix Corporate Center in Danbury, Conn.
The business offers next-day service for dry cleaning and laundry. The cleaners is one of the amenities ... more

JoAnne Brennan McGrath, manager of the Merritt 7 office complex, stands in the construction at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013.The McGladrey survey say that the outlook of commercial real estate professionals in Connecticut is improving slightly. McGrath said she is seeing an improvement. less

JoAnne Brennan McGrath, manager of the Merritt 7 office complex, stands in the construction at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013.The McGladrey survey say that the outlook of commercial real ... more

JoAnne Brennan McGrath, manager of the Merritt 7 office complex, stands in the construction at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013. The McGladrey survey say that the outlook of commercial real estate professionals in Connecticut is improving slightly. McGrath said she is seeing an improvement. less

JoAnne Brennan McGrath, manager of the Merritt 7 office complex, stands in the construction at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013. The McGladrey survey say that the outlook of commercial ... more

David Fiore, Marcus Partners principal, and JoAnn Brennan McGrath, manager of the Merritt 7 office complex, stand in the construction at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013.The McGladrey survey say that the outlook of commercial real estate professionals in Connecticut is improving slightly. McGrath said she is seeing an improvement. less

David Fiore, Marcus Partners principal, and JoAnn Brennan McGrath, manager of the Merritt 7 office complex stand in Starbucks at 301 Merrit 7, in Norwalk, Conn., Monday, April 1, 2013.The McGladrey survey say that the outlook of commercial real estate professionals in Connecticut is improving slightly. McGrath said she is seeing an improvement. less

Conducted between January and early March, the poll tracked answers from 92 respondents including brokers, developers, bankers, appraisers and economic development officials around the state.

The results of the index -- which is formulated after the Consumer Confidence Index and compares data from month to month -- are the best in nearly three years. Aggregate measures within the sector encompassing office, industrial, retail and investment real estate offer some optimism amid a regional economic recovery that appears to be gaining traction, according to the Connecticut Economic Resource Center, a non-profit organization and public-private partnership in Rocky Hill.

But despite the index's climb, Alissa DeJong, director of research at CERC, cautioned there is no reason to be giddy about the results.

"With the U.S. sequestration underway, there is another downside risk to the economy because of across-the-board federal agency budget cuts," she said, noting that the index can go as high as 100 points and it's only at 26.5.

An index level of 26.5 is still low, said Steve Kirn, a partner at McGladrey, the assurance, tax and consulting firm that sponsors the index, but he sees reason for optimism.

"Recovery is becoming a bit more tangible according to these latest results," said Kirn, who heads McGladrey's real estate industry group in Stamford.

Based on James Fagan's observations, however, the sunny survey results don't reflect the Cushman & Wakefield executive's experience in the last quarter.

"We're seeing overall leasing activity is down," said Fagan, a senior managing director whose Stamford office focuses on the Fairfield County office market. We had negative absorption, which means vacancies have gone up. We have the slowest straight leasing activity in a decade."

That's in comparison to a vacancy level of only about 2 percent for the more than 2.5 million square feet of Class A office space and flex and research and development buildings owned and managed by R.D. Scinto in Shelton. Class A office buildings typically offer myriad amenities and with the most modern technology and accommodations.

Retaining tenants in today's competitive office market is a challenge, said Robert Scinto, chairman and chief executive officer.

A key factor is service, continuous maintenance and affordable lease rates, according to Scinto, whose company has 32 buildings in Shelton and nearby towns.

"If you have good quality Class A buildings filled with Class A tenants, they don't go to Class B buildings," he said.

Many of R.D. Scinto's leases are offered in the mid-teens, typically lower than the average $21.54 per square foot for Class A buildings in eastern Fairfield County, according to data provided by Jones Lang LaSalle in a January quarterly report.

Those rates pale compared with the $46.33 per-square-foot average charged for Class A space in the Stamford central business district and the $89.85 per square foot for Class A space in the Greenwich central business district, Jones Lang LaSalle's report showed.

JoAnn McGrath, property manager of the sprawling Merritt 7 office complex in Norwalk, is one of those commercial real estate professionals who is upbeat about the market, and based on recent deals she has done, it's no surprise.

"We're feeling good. We have activity and are hoping to get some deals done that are on the table (both renewals and new tenants)," she said, adding that the 1.4-million-square-foot complex is 90 percent occupied.

With per-square-foot lease rates in the $30s, McGrath signed nine new tenants and five renewals in 2012. But what will happen to lease rates isn't clear based on results from the McGladrey survey.

Fifty-three respondents to the McGladrey survey said they expect lease prices to rise, but 47 percent said lease prices are apt to drop in the next three months.

Asking lease rates at Matrix Corporate Center in Danbury, the former Union Carbide headquarters, are at $24.50 per square foot, and its management team is willing to do deals, said Aaron Smiles, managing director head of commercial leasing.

Its owner, Matrix Realty Group of Smithtown, N.Y., which bought the complex in 2009, has enough confidence in the state's commercial real estate market to be undertaking $10 million in improvements. That follows $10 million in work after it acquired the 1.3-million-square-foot facility.

The improvements apparently are paying dividends as occupancy has risen to 71 percent from 61 percent when the complex was purchased.

Boehringer Ingelheim, the Germany-based pharmaceutical giant, also recently renewed a lease to remain 10 more years in 327,000 square feet, and The Goddard School will operate a 10,000-square-foot early childhood development center for 140 pupils at Matrix by early June.

"I think the market in general is on the upswing. We're real busy here," Smiles said, adding that he is negotiating with several prospective tenants.

According to findings in the McGladrey report, employers who occupy many office buildings will make do with their existing workforce and will not add significant numbers of workers until demand for products and services becomes more robust. There has been greater emphasis on hiring temporary workers.

"Labor demand remains lackluster relative to prior economic recoveries as many area employers seem to be adopting a wait-and-see approach to permanent future hires given the heightened sense of economic uncertainty," said Peter Gioia, vice president and economist at the Connecticut Business & Industry Association, co-sponsor of the survey. "In addition, there has been greater emphasis on temporary hires versus permanent hires because it provides employers with increased flexibility."

But Brett Sherman, senior vice president of Angel Commercial in Fairfield, said he is "cautiously optimistic" about the commercial real estate market.

The state's industrial sector has been buoyed by strong export growth in recent years, but economic weaknesses in Europe could impact it.

McGladrey's Future Expectations Index component also posted solid results in the first quarter, setting a new high with an index level of 26.3 as opposed to 14.9 last quarter.

Over the next three months, 23 percent of respondents expect to see improvement in the state's industrial real estate market, while 56 percent stated that the near-term future conditions will be "fair."

Regarding the retail market, 24 percent of respondents characterize retail market conditions as "good" or "excellent," while 49 percent said conditions are "fair," and 27 percent said they are "poor."

Sixty-five percent of respondents said they expect sales transactions in the retail sector to increase in the next three months.

The survey results lifted the spirits of Donald Klepper-Smith, chief economist and director of research at DataCore Partners, one of the publishers of the index.

"It is truly encouraging to finally see some better numbers for Connecticut's commercial real estate sector," he said. "Additionally, if we can realize further improvement in the local labor markets during 2013, then I would expect to see further gains in our aggregate measures that assess the overall health of Connecticut's commercial real estate sector.

Good news here for sure."

His upbeat comments countered a report he issued in January showing that between December 2011 and December 2012 the state lost 51,130 people in its labor force, falling to 1.85 million.

"Employment in the state is pretty weak (a February unemployment rate of 8 percent)," said Mark LeClair, an economics professor at Fairfield University. "The GDP (gross domestic product) is flat and it's not growing. That doesn't bode well for commercial real estate. But commercial real estate owners can offer better deals if they've re-financed."